Planning for retirement is no easy walk in the park, especially if you are living abroad. With multiple tax systems, pension schemes, and currencies to consider, creating a robust retirement strategy requires careful planning and expert guidance. Here’s how to build an airtight retirement plan as an expert.
First up - Why is retirement planning different for expats?
Living abroad adds layers of complexity to retirement planning. Expats often juggle multiple currencies, face multiple tax systems, and manage pension schemes across borders. These factors can do a number on your retirement savings and future income streams.
Understanding pension options for expats
For British expats, the state pension remains the number one consideration. However, working abroad may affect your national insurance contributions and pension entitlements. Many expats complement their state pension with private pension schemes, workplace pensions, or self-invested personal pensions (SIPPs).
Some countries offer specific pension arrangements for foreign residents. For instance, both Spain and Portugal provide tax-efficient options for expat retirees through their non-habitual resident programmes. Obtaining residency through a golden visa can amplify these tax benefits.
What you should consider for expat retirement planning
(1) Think currency first
Living costs in foreign currencies can affect your retirement savings in more than one way. Exchange rate fluctuations might affect your purchasing power, making it crucial to consider currency hedging strategies or maintaining savings in multiple currencies.
(2) Current & future health care costs
Healthcare costs vary dramatically between countries. While some nations offer universal healthcare, others require private medical insurance that can set you back thousands of pounds each year. It pays to incorporate these costs (and those of your future care) into your retirement plan.
(3) Tax, tax, tax
How is tax treated for pension income and investments in your host country? If there are double taxation agreements between your two homes, you want to know how these apply to your situation for efficient tax planning.
What are the best investment strategies for expats?
A diversified investment portfolio often forms the backbone of retirement planning. For expats, this might include property investments in multiple countries, offshore investment bonds for tax efficiency, and multi-currency investment accounts. You can also go for a fixed-interest product like property loan notes.
Choosing your retirement destination
The choice of retirement destination can make or break your financial planning. Popular expat retirement destinations like Portugal and Spain offer various benefits:
Lower cost of living compared to the UK
Tax advantages through special resident programmes
High-quality healthcare systems
Established expat communities
How to build a reliable income stream for your retirement
Creating reliable income streams is the be-all, end-all for a comfortable retirement. This might include:
Regular pension payments
Rental income from property investments
Investment dividends
Fixed-interest investments
How we can help
Expat retirement planning requires specialist knowledge. Working with financial advisers who understand cross-border taxation and investment regulations can help avoid costly mistakes and maximise retirement income. That’s why we are here at International Wealth Ventures.